Extended Car Warranties: Peace of Mind or Something Else?

Uncovering the coverage offered by extended-warranty companies.

The TV commercials are slick and convincing: Buy a “service contract” for your out-of-factory-warranty vehicle—even if it has more than 200,000 miles on it—and never face repair bills again.

Too good to be true? Probably. Three principal companies that sell these extended warranties—US Fidelis (the largest), Mogi, and StopRepairBills.com—as well as about 35 others, operate in the St. Louis area. All have websites, but business is conducted only by phone, with salespeople paid by commission, working from a script.

Illegal? Probably not, but Michelle Corey, head of the St. Louis Better Business Bureau, says the sheer volume and ongoing complaint patterns involving industry giant US Fidelis, as well as complaints against numerous other St. Louis–area extended-vehicle-service-contract companies, are “nothing short of astonishing.”

“We continuously are receiving reports from consumers saying they have been pressured or misled into buying warranty contracts they either don’t want or don’t need, or have been left holding the bag when the claim-processing company refuses to pay for costly repairs,” she says. US Fidelis, as well as Mogi and StopRepairBills.com, has an “F” grade with the St. Louis BBB, the lowest possible.

An example from Corey’s US Fidelis file: The owner of a construction company reported he received phone calls and direct-mail solicitations from US Fidelis regarding his Ford F-250 Super Duty pickup. He said he told the salesman that the truck was titled in his company’s name and asked whether that would be a problem, and the salesman told him it would not. He paid $2175 for the warranty. Eighteen months later, the truck had transmission problems, with repairs totaling $9500. The insurer refused to pay, noting that the name of the man’s business was on his truck’s title.

Robert Kasper, a mechanic in Orlando, Florida, has dealt with dozens of these claims. Sometimes, Kasper says, the fine print helps the companies keep from paying. “One of my customers had an electrical fuel pump go out, and the company said it wasn’t covered. I called the customer, and she read off her policy: ‘We cover mechanical components including fuel pumps . . .’ Her fuel pump was electric, not mechanical, so it wasn’t covered.” The St. Louis BBB has received 1146 complaints about US Fidelis, but Ken Fields of Fidelis says that represents “well under one-half of one percent of our customer base. And the last time I looked, we had only three unresolved complaints.” The business uses a halo in its logo and describes itself as a “faith-based” firm, reflecting the values of company founder Darain Atkinson. Last April, the St. Louis Post-Dispatch described Atkinson as a “convicted thief, burglar, check forger, and counterfeiter” who found the Lord while incarcerated in jail and is presently being blessed with a new $17 million, 20,752-square-foot home that is under construction.

While Mogi refuses to speak to the press, US Fidelis and StopRepairBills.com have active spokespeople and clerks who track down and refute negative online comments about their companies. Mike Carter, an attorney for StopRepairBills.com, says much of the company’s problems with the BBB come more from clerical issues than customer service. The BBB, for instance, doesn’t like the name StopRepairBills, arguing that it implies that customers will never again be faced with repair bills. Carter likens it to the electronics chain Best Buy: “Is every product in that store a ‘best buy’? Every product?” Carter says his company is working with the BBB to try and get the company’s ratings up to, say, a “C.”